20080318notice_of_application_order_no_30514.pdf

Office of the Secretary
Service Date
March 18 2008
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR CASE NO. IPC-08-
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR ELECTRIC SERVICE NOTICE OF APPLICATION
DUE TO THE INCLUSION OF THE
DANSKIN CTI PLANT IN RATE BASE NOTICE OF
MODIFIED PROCEDURE
ORDER NO. 30514
On March 7, 2008, Idaho Power filed an Application to recover its actual and
planned investment for a new gas-fired combustion turbine located at the Evander Andrews
Power Complex in Mountain Home.l More specifically, the Company seeks to add to rate base
$64 981 978 attributable to the cost of constructing the generating facility and the necessary
transmission and interconnection facilities. Using the Company s currently authorized 8.10%
rate of return, Idaho Power calculates that it needs to increase its annual revenue requirement in
Idaho by $9 010 952. To recover the proposed revenue increase, the Company proposes that
rates for all existing customer classes and its three special-contract customers be uniformly
increased by 1.39%. The Company requests that the proposed increase to its base rates become
effective June 1 , 2008, which would coincide with the rate change resulting from the annual
Power Cost Adjustment (PCA) mechanism.
BACKGROUND
In December 2006, the Commission issued Order No. 30201 granting Idaho Power
application for a Certificate of Public Convenience and Necessity (CPCN) to construct and
1 The Company s newest combustion turbine was previously referred to as the "Evander Andrews Power Plant" In
the present Application, the Company has renamed the power plant "Danskin Combustion Turbine No.1" or
Danskin CTl." The two existing 45 MW gas-fIred turbines at the same site are now referred to as "CT No.2 and
No." Application at n.1. The Company has renamed the site of the three combustion turbines as the "Evander
Andrews Power Complex." Application at 1. In addition to the three gas-fIred turbines at the Evander Andrews
Power Complex, the Company also has the Bennett Mountain (162 MW gas-fIred, simple-cycle) power plant located
in Mountain Home. Order No. 29410.
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NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30514
operate the new Danskin CTI. Idaho Code 9 61-526; Case No. IPC-06-09.2 Danskin CTI is a
170 MW natural gas-fired, simple-cycle combustion turbine. The generating plant was
constructed by Siemens Power Generation. Williams Northwest Pipeline will provide the natural
gas necessary to fuel the plant. Reasonable fuel costs for the Danskin CTI plant are to be
recovered through the PCA mechanism. Id.
In its Certificate application, Idaho Power provided the Commission with a
commitment estimate" ofthe project's total capital cost. The commitment estimate for the plant
was $60 million, which included the firm bid price for the turbine ($49 999 000) plus additional
costs such as sales taxes, AFUDC 3 oversight and change orders. Order No. 30201 at 17. The
commitment estimate did not include the cost of constructing or upgrading the transmission
facilities - necessary to connect the Danskin CTI plant with the existing transmission system. Id.
at 18. At the time, Idaho Power s transmission group "provided a preliminary upper limit
estimate of $22.8 million" for the interconnection and/or transmission upgrades for the plant.
Application at 5 (Case No. IPC-06-09). Subject to two exceptions 4 Idaho Power offered to
absorb the capital costs that exceed the commitment estimate. Order No. 30201 at 12.
In Order No. 30201 the Commission found that in the ordinary course of events
Idaho Power may anticipate ratebasing $49 999 000 (the amount of the turbine contract). The
Commission specifically reserved its approval of recovering costs in excess of the contract price
up to the commitment estimate of $60 million "until after the project is constructed and an audit
of such costs is completed.Id. at 14. "Transmission costs to upgrade the system between
Mountain Home and the Treasure Valley are subject to future review once the upgrade has been
constructed.Id. at 18. The Company was also ordered to provide the Commission with an
updated report of the transmission costs.
2 The Commission issued Certificate No. 465 authorizing Idaho Power to construct the Danskin CTl on December
2006.
3 "AFUDC" means Allowance for Funds Used During Construction. AFUDC is an accounting mechanism that
recognizes the capital costs associated with fmancing construction projects. Order No. 29838 at 11.
4 The two exceptions were the costs of equipment to comply with new air quality requirements and escalations in
assumed forecasts (such as inflation).
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NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30514
THE PRESENT APPLICATION
A. Plant Costs
YOU ARE HEREBY NOTIFIED that in the testimony that accompanies the
Application, Company witness Michael Youngblood states that the Danskin CTI plant will be in
commercial operation on June 1 , 2008. Prefile Testimony at 4, ll. 21-23. He explained that the
change in rates attributable to the Danskin CTI project will coincide with the Power Cost
Adjustment (PCA) rate adjustment that normally occurs on June I of each year. Id. at 5-
YOU ARE FURTHER NOTIFIED that Mr. Youngblood stated that the total capital
investment in Danskin CTI plant is anticipated to be $57 335 866 as of June 1 , 2008. The
Company also anticipates booking an additional $314 995 "shortly after June 1 2008. The total
amount of $57 650 861 ($57 335 866 + $314 995) is the basis for the Danskin CTI power plant
portion of the June 1 rate change that the Company is requesting in this proceeding.Id. at 7.
The $57.65 million is comprised of the following elements:
Actual Charges thru Estimated Charges Estimated Charges
Feb.June 2008 thru 6/30/08
Turbine Contract 999 100 999 900 999,000
Change Orders 493,386 191 930 685 316
Sales Taxes 312 256 180 000 492 256
Engmeering,
Oversight & Support 130 549 325,000 1,455,549
Other Infrastructure 341 718 375 000 716 718
Test Fuel 049 398 951 400 000
AFUDC 267 022 635 000 902 022
TOTAL 545 080 105 781 650 861
Source: IPCo Exhibit No.
The Company noted that the estimated charges of $57.65 million are approximately $2.
million less than the $60 million commitment estimate it provided in 2006.
B. Transmission Costs
YOU ARE FURTHER NOTIFIED that as noted above, the Company initially
estimated that the transmission and interconnection costs were approximately $22.8 million.
Because the Company s initial transmission costs were based upon an estimate, the Commission
ordered Idaho Power to provide detailed transmission information and costs. Order No. 30201 at
18. In compliance with that directive, the Company filed a "Facility Study Report" with the
Commission on February 20, 2007. In the study, the Company estimated that the
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interconnection costs will be approximately $775 000 (+/- 20%) and the transmission upgrade
will cost $22 392 414 (+/- 20%). The combined interconnection and transmission upgrade cost
was reported to be $23 167,415, or within a range of $18.5 to $27.8 million. Youngblood at 12.
YOU ARE FURTHER NOTIFIED that the construction of the transmission system
in this case includes four primary components: (1) a 230 kV transmission line connecting the
Danskin complex and the Bennett Mountain plant; (2) the new Hubbard Substation; (3) a 230 kV
transmission line between Danskin and the Hubbard Substation; and (4) the communications that
tie all the pieces together. Id. In this Application, the Company has included the costs of the
Danskin-Bennett 230 kV transmission line (item No.1 above) and the communications that tie
the two plants together (item No.4 above). The other two components (the Hubbard Substation
and the 230 kV line between the Danskin complex and the Hubbard Station)"are scheduled to be
placed into service in October 2008:' Id. at 14. These last two components have an estimated
cost of $19.5 million. The Company will seek to recover this amount in a subsequent
application. Id. at 15.
YOU ARE FURTHER NOTIFIED that due to delays in construction, the Company
seeks to recover only $7 331 116 out of the $26.83 million in projected transmission costs as part
of this Application. Youngblood at 10. This amount is comprised of actual charges as of
January 31 , 2008 , and estimated charges from February through June 1 2008. As of January 31
2008, the Company stated it has incurred work order charges of $6 554 318 plus AFUDC of
$139 811. Exh. No.3. The Company anticipates that between February and May 30, 2008 it
will incur additional transmission charges totaling $636 987 ($621 853 + $15 134 AFUDC). Mr.
Youngblood explained that the delays were attributed to unanticipated appeals of a required
conditional use permit and delays in the BLM permitting process. Id. at 13.
YOU ARE FURTHER NOTIFIED that in summary, the Company requests authority
to rate base $64 981 978 ($57 650 861 for the plant and $7 331 116 for interconnection and
transmission facilities). Application at 2.
C. Proposed Rates
YOU ARE FURTHER NOTIFIED that based upon its authorized rate of return of
10%, Idaho Power calculates that it is entitled to an additional annual revenue requirement of
010 952. Application at 3. To recover this additional revenue, the Company proposes a
uniform average percentage increase of 1.39% for all existing customer classes and its three
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NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30514
special-contract customers (Micron, Simplot, INL). Id. The Company proposes that the increase
in base rates become effective June 1 , 2008 , to coincide with the PCA rate change.
YOU ARE FURTHER NOTIFIED that Idaho Power states in its Application that it
has issued a media release and will notify its individual customers by bill inserts. Id. at 5. The
Company requests that the Commission process this case by Modified Procedure with rates to
become effective on June 1 2008.
NOTICE OF MODIFIED PROCEDURE
YOU ARE FURTHER NOTIFIED that the Commission has determined that the
public interest may not require a formal hearing in this matter and will proceed under Modified
Procedure pursuant to Rules 201 through 204 of the Idaho Public Utilities Commission s Rules
of Procedure IDAPA 31.01.01.201 through .204.The Commission notes that Modified
Procedure and written comments have proven to be an effective means for obtaining public input
and participation.
YOU ARE FURTHER NOTIFIED that any person desiring to state a position on this
Application may file a written comment in support or opposition with the Commission no ~ater
than Tuesday, May 13,2008. The comment must contain a statement of reasons supporting the
comment.Persons desiring a hearing must specifically request a hearing in their written
comments. Written comments concerning this Application shall be mailed to the Commission
and Idaho Power at the addresses reflected below:
Commission Secretary
Idaho Public Utilities Commission
PO Box 83720
Boise, ID 83720-0074
Street Address for Express Mail:
Donovan E. Walker
Attorney II
Idaho Power Company
PO Box 70
Boise, ID 83707-0070
Mail: dwalker~idahopower.com
472 W. Washington Street
Boise, ID 83702-5983
Michael J. Youngblood
Idaho Power Company
PO Box 70
Boise, ID 83707-0070
E-mail: myoungblood~idahopower.com
These comments should contain the case caption and case number shown on the first page of this
document.. Persons desiring to submit comments via e-mail may do so by accessing the
Commission s home page located at www.puc.idaho.gov. Click the "Comments and Questions
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ORDER NO. 30514
icon, and complete the comment form, using the case number as it appears on the front of this
document. These comments must also be sent to Idaho Power at the e-mail addresses listed
above.
YOU ARE FURTHER NOTIFIED that if no written comments or protests are
received within the time limit set, the Commission will consider this matter on its merits and
enter its Order without a formal hearing. If written comments are received within the time limit
set, the Commission will consider them and, in its discretion, may set the same for formal
hearing.
YOU ARE FURTHER NOTIFIED that Idaho Power s Application and prefiled
exhibits and testimony of Michael Youngblood have been filed with the Commission and are
available for public inspection during regular business hours at the Commission offices. The
Application and testimonies are also available on the Commission s Web site at
www.puc.idaho.gov under "File Room" and then "Electric Cases.
YOU ARE FURTHER NOTIFIED that all proceedings in this case will be held
pursuant to the Commission s jurisdiction under Title 61 of the Idaho Code and specifically
Idaho Code 99 61-307,61-503 61-523, and 61-622. The Commission may enter any final Order
consistent with its authority.
YOU ARE FURTHER NOTIFIED that all proceedings in this matter will be
conducted pursuant to the Commission s Rules of Procedure, IDAPA 31.01.01.000 et seq.
ORDER
IT IS HEREBY ORDERED that persons desiring to submit written comments
regarding this Application may do so no later than May 13 2008.
NOTICE OF APPLICA nON
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30514
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this &'tI'
day of March 2008.
ATTEST:
~tD
D. Jewell
ission Secretary
bls/O:IPC-08-0l dh
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30514
MARSHA H. SMITH, COMMISSIONER
fI
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JI D. KEMPTO , CO MISSIONER